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The average 30-year fixed mortgage rate surpassed 6% this week — the first time it’s done so since 2008, according to Freddie Mac. Rates have been rising in September and are now over a full percentage point higher than they were just six weeks ago.

Why do rates keep rising? In spite of efforts from the Federal Reserve, the economy is still running hot, and inflation isn’t coming down as quickly as many expected it would. This means that the Fed will need to continue raising the federal funds rate to try to tame price growth.

“Over the past few weeks, we have seen short-term and long-term interest rates rise to several year highs,” says Scott Haymore, head of mortgage pricing and secondary markets at TD Bank. “This was driven by US and global inflation, continued strong employment numbers, and a Fed that is committed to raising rates quickly to slow growth and tame inflation.”

Until inflation shows sustained signs of slowing down to the Fed’s target annual rate of 2%, mortgage rates will likely remain at their current levels. They may even continue increasing.

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Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.

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30-year fixed mortgage rates

The current average 30-year fixed mortgage rate is 6.02%, according to Freddie Mac. This is the highest this rate has been since 2008, and the fourth week in a row it’s increased.

The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.

The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates. 

15-year fixed mortgage rates

The average 15-year fixed mortgage rate is 5.21%, an increase from the prior week, according to Freddie Mac data. The last time this rate was above 5% was in 2009.

If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates …read more

Source:: Business Insider

      

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